Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. q8) airline will purchase 2 million gallons of jet

Q8) Airline will purchase 2 million gallons of jet fuel in one manth and hedge...

70.2K

Verified Solution

Question

Accounting

image
Q8) Airline will purchase 2 million gallons of jet fuel in one manth and hedge using heating oil forwards. A standardized heating oil future contract contains 1000 barrels ( 1 barrel is 42 gallons). How many Future contracts are required to hedge? Given a) the standard deviation of 1-month change in the heating oil futures contract is 0.0313, b) the standard deviation of change in 1-month Jet Fuel spot price is 0.0263, and c) the correlation between the change in 1-month heating oil future price and the change in 1month jet fuel price is 0.928. B: The contract size of S\&P 500 Futures is $250 S8P 500 futures price. The future Price of 58P500 is 1,000 . A portfolio of $5 million with a beta of 1,5 needs to be hedged (I.e., beta is to be made 0). How many contracts are required? Should I buy or sell the contract

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students